LONDON (ShareCast) - Shares in French conglomerate Bouygues fell 8% on Wednesday after the company said that its board of directors has decided unanimously not to follow up on Altice's unsolicited offer to acquire Bouygues Telecom.
The company said that Bouygues Telecom is well positioned to take advantage of growth in the telecoms markets, thanks to the strong and long-term competitive edge afforded by its portfolio of frequencies and its 4G network.

In addition, Bouygues said the offer represents a significant execution risk, which should not be borne by Bouygues, particularly in terms of completion law in both the fixed and mobile markets.

Bouygues said it also paid great attention to the consequences of market consolidation on employment as well as the social risks inherent to such an operation.

"The Bouygues group has always strived to write an industrial story that creates value in the long term with its employees and suppliers, and in the interests of its customers, while respecting its commitments in terms of investment for the development of French infrastructures," it said.

Exane BNP Paribas, which rates Bouygues at 'neutral', said the company is not formally closing the door, but the main sticking point appears to be antitrust risk and not price.

"Unless Altice is 100% certain of approval - in which case it could opt to offer a very high break-up fee - a deal seems unlikely in the short term," it added.

Exane said that while the probability of a deal in the near term has reduced, it does not expect the market to fully write it off. "Like us, the market may be less convinced by Bouygues' argument that it has a bright future as a stand-alone in telecoms," it said.

Raymond James, which rates the stock at 'market perform', said with the offer now out of the picture, investors will have to focus on fundamentals again rather than consolidation scenarios.

It said it expects investors to be concerned about company strategy following the decision to reject Altice's bid.

"We now see limited valuation re-rating potential from the ongoing commercial/financial turnaround or an asset sale," says Raymond James.

Meanwhile, Kepler Cheuvreux downgraded its rating on Bouygues to 'hold' from 'buy' and cut the target price to €35 from €40.

"While two of the reasons do not necessarily close the door on an improved bid, the third reason - guarantees for employees - might," said Kepler.

At 10:49, Bouygues shares were down 8.1% at EUR34.94, while Altice shares were off 7.2% at EUR120.70.

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